Australia Posts 1.3% GDP; Aussie Dollar Soars

Australia's economic growth had exceeded expectations in the last quarter of 2011 on the back of better consumer spending and construction activities.

The Australia Bureau of Statistics (ABS) on Wednesday reported that the country's gross domestic product (GDP) expanded 1.3% from the previous months, beating economists and analysts expectations when it rose a revised 0.6%.

The GDP rose a seasonally adjusted 4.3%, for the 12 months to March, the ABS data said.

The country's currency, the Aussie, broke an intraday high of 0.9845 from around 0.9780 before the data was released, according to Nick White,general manager at Bell Potter Securities, based in Melbourne.

"It beat all expectations and raises questions about the RBA's need to cut interest rates by 75 basis points since May 1," adds Mr. White in a commentary sent to au.ibtimes.com.

He notes that this the RBA's way of readying the Australian economy for the global shock that might hit Australia's export-oriented economy.

"Growth for the quarter was driven by consumption expenditure and a decent contribution from business investment,"explains Mr. White. .

The ABS data indicated that household spending added adding 0.9 percentage point to GDP growth recording a growth of 1.6 %in the first quarter.

Non-dwelling construction, on the other hand, rose 12.6%, adding 1 point to over-all growth, the report showed.

The country's exports, on the other hand, declined 1.3 %, losing 0.2 points from the expansion.

Australia's household savings ratio was little changed at 9.3%in the three months through March from 9.4 percent in the fourth quarter of 2011, the report showed.

Yesterday, the RBA slashed benchmark interest rates further by 25 basis points to cope with the faltering economies in Europe and that of China's-the country's biggest trading partners to date.

Although Australia can strongly do on its own, the risk effect of a commodity exports decline has been anticipated to make a huge impact on the local economy.